Ex-investment industry guy willing to take questions

Peyton Manning

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late 50's just got 50k to invest. with the market being so high now, is it a good time to buy into mutual funds? won't they just drop when the market corrects?
 

lastleg

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jeff, I recommend Vanguard's Wellington Fund but first google the fund performance chart to see the long term track record
of all it's funds. Wellington holds stocks and bonds.

Eric has ignored me, maybe he can advise you on how to get the most bang for your buck.
 

Native Floridian

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late 50's just got 50k to invest. with the market being so high now, is it a good time to buy into mutual funds? won't they just drop when the market corrects?

Jeff, the best time to invest is when you have the money to do so. No one can predict the market. WE can only look at events, economic, political etc and try to adjust our risk accordingly. IF you are going this alone ,without an advisor i would suggest that you educate yourself before you invest. That's going to take some time and effort. And, quite frankly asking investment questions on a metal detecting forum isn't the right way to go about it. You will get many well meaning answers. Most of them uninformed. And, if you do follow a recommendation of a forum member and it goes wrong, it is unlikely you will be able to hold that member responsible. It's your money, you're a big boy, you should have known better. That's not to say the suggestion LL has given you is a bad idea. Only that what has worked for others may not work for you. Their success is based on exactly when they invested, for how long, and in what. One thing is for sure, what's past is past. What does the future hold? That future is where your money will be invested, not the unrepeatable past.

Regarding worry over investing at the wrong time in a market cycle. There is a strategy known as DCA. it's a very basic strategy. DCA is dollar cost averaging. DCA is feeding money into a portfolio over a period of time rather than all at once. If you've ever contributed to a 401k you've already employed DCA. The primary benefit of DCA is that it makes you a correct investor. Feeding in equal periodic amounts will buy you less shares when prices are high and more shares when prices are low. Even without the 50k to invest, do this out of cash flow month after month year after year and it is the road to riches.

Be aware that when you have a lump sum to invest DCA is a double edged sword. You will be happy camper if, while employing DCA ,the market is in a downtrend. But in an uptrend, you will grit your teeth that you didn't go all in. Lastly, If the market is in an extended downtrend it is important to keep feeding the money in. Don't try to out guess the market.
 
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lastleg

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Dollar cost averaging is great for long horizon investors, especially younger people. When you get over 50 and have a lump sum
to invest you don't want to put that money at risk. Therefore, I don't think jeff should buy one stock or one annuity or one bond.

Mutual funds are usually very diversified, meaning they hold sometime hundreds of different equity holdings. I like Wellington
because it also holds safe fixed income bonds of various maturities to spread the risk of rising interest rates. If you also check out
what the WS pros are doing on CNBC will keep you aware of interest rate trends.

And if you still have no clue what we are discussing visit with a financial advisor to make sure you are going in the right direction.
 
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0121stockpicker

0121stockpicker

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Native Floridian said:
Historically, this is sound advice. reinvested dividends make a huge difference in returns. This holds especially true with mutual funds. Where i disagree is with the risk assessment on div paying stocks in a rising rate environment.

Right now we have historically low interest rates. Those rates are being held at these levels artifically putting most areas of the bond market into an extremely overbought condition. This is evidenced by yet another year of net outflows of Equity mutual fund assets and net inflows for Bond funds. Some see this as a bond bubble. Regardless of how it happens once rates start to rise, and probably well before, there will be mass exodus out of the bond market. In a normal market rotation when money flows out of bonds one of the historic pockets for that money is dividend paying stocks. Bond investors still seek income and safety and dividend paying companies are but one shelter that meet those needs. As it stands, high quality div paying stocks are doing well because of the low rate environment.

As we move forward, many see an end to the 30 year secular bull market in bonds. Whether that's true or not, the one place you don't want to be when the music stops is in the bond market. More specifically in bond mutal funds. And in bond funds where the protfolio is now at a significant premium. Or in funds that are managed for total return. There are some safe havens in the spread market. Still, all that money is going to be looking for a place to land. If traditions hold those seeking income and quality will look to dividend paying companies. For these reasons, rising interest rates, when combined with the positive economic climate that will usher them in, instead of putting pressure on dividend paying stock prices could be a catalyst to higher price levels.

Native - excellent point. I agree the long bond could hand one some serious losses. Those who chased yield over the last few years could be in for a surprise. I would go after div paying stocks of either cyclical companies or staples and avoid pure yield plays like utilities that might be impacted a lot more in a rising interest rate environment. Stocks don't look to bad given improving economy, great balance sheets etc.

I'd also watch out for precious metals at this point. Best.
 
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0121stockpicker

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lastleg said:
Eric, what do you predict for fixed income mutuals for 2013? 73 yr old, no debt, all in Vanguard.

I'd just make sure the average maturity of the fund is short to intermediate at the most. As rates start going up you could be handed some serious capital losses if you are in long bonds.

Could also put a bit in to an equity income fund. A lot of high quality companies have dividend rates higher than bond rates (but obviously stocks can go down so there is risk). Best
 
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0121stockpicker

0121stockpicker

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lastleg said:
Native F, thanks for your opinion. However I am no novice to mutual funds. I went to ML in 1979 to open an IRA and got
churned every six months. Then to Ivy later to Janus and you may know their outcome. Meantime I bought WM shares and
that was another useless exercise. Finally after investing wifes money in Vanguard I came onboard and am happy I did. I learned
that I did not have a chance investing free lance even though I pored over the WSJ every day for years.

As far as getting blown up without a guarantee to never lose a cent I don't know of any investment without market risk. With one
exception, CDs. That is a slow boat to bankruptcy. And annuities are insurance products and feeds the salesmen while leaving the
buyers eating gruel

Vanguard has been very good to me. I won't say how good but I'll never have to turn a lick except for helping the less fortunate.

Actually my money is with vanguard also.
 
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0121stockpicker

0121stockpicker

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Native Floridian said:
Jeff, the best time to invest is when you have the money to do so. No one can predict the market. WE can only look at events, economic, political etc and try to adjust our risk accordingly. IF you are going this alone ,without an advisor i would suggest that you educate yourself before you invest. That's going to take some time and effort. And, quite frankly asking investment questions on a metal detecting forum isn't the right way to go about it. You will get many well meaning answers. Most of them uninformed. And, if you do follow a recommendation of a forum member and it goes wrong, it is unlikely you will be able to hold that member responsible. It's your money, you're a big boy, you should have known better. That's not to say the suggestion LL has given you is a bad idea. Only that what has worked for others may not work for you. Their success is based on exactly when they invested, for how long, and in what. One thing is for sure, what's past is past. What does the future hold? That future is where your money will be invested, not the unrepeatable past.

Regarding worry over investing at the wrong time in a market cycle. There is a strategy known as DCA. it's a very basic strategy. DCA is dollar cost averaging. DCA is feeding money into a portfolio over a period of time rather than all at once. If you've ever contributed to a 401k you've already employed DCA. The primary benefit of DCA is that it makes you a correct investor. Feeding in equal periodic amounts will buy you less shares when prices are high and more shares when prices are low. Even without the 50k to invest, do this out of cash flow month after month year after year and it is the road to riches.

Be aware that when you have a lump sum to invest DCA is a double edged sword. You will be happy camper if, while employing DCA ,the market is in a downtrend. But in an uptrend, you will grit your teeth that you didn't go all in. Lastly, If the market is in an extended downtrend it is important to keep feeding the money in. Don't try to out guess the market.

Native are you a financial advisor / CFP? Sounds like you know a lot about investing. I started off in the research department of a large asset manager in Boston and then spent 20 years as an equity analyst for a few diff investment banks.
 

Native Floridian

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SVP/FA at a major, 30 years exp, just over 300 mil AUM.

Truthfully, i'm a dinosaur. I'm old school. Between my production and totally clean U4, 29 years, 11 months and 22 days without a complaint, my bosses have to put up with me. Not that they mind. I run my business my way.

I'm not a CFP. I'm not a CFP because at the time of my major business building the CFP was what I call a match book cover designation. Remember when technical schools use to advertise on match Book Covers? Anyway, of course the CFP has come a long way since. But, back in the day, if you could fog a mirror and count to ten you got your CFP. OK, maybe not that easy, but certainly not very hard. Some of the guys i know who have the designation are not the sharpest tools.

Today the CFP holds value. if i wasn't already built I'd probably get one. But as it is why? I compete against CFPs every day. I win more than i lose. It's me selling from the heart while they sell from the chart. For me it's fun because while they get all wrapped up talking Wall Street to show how smart they are I sit down and talk mainstreet making a personal connection with the prospect. It's a people business. It's worked for me.

Obviously i can't give advice here on a personal level. So, I'll limit my comments to direction, general investment concepts, and do my best not to nit pick the well intentioned advice given here.
 
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lastleg

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Jeff, what native is saying is he is not a Certified Financial Planner. But he implies that my advise is inane, What I don't
understand is why my investment returns can be inferior if they are genuine.
 

Native Floridian

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LL, I wasn't referring to you with that comment. Still, i rethought the comment and edited it out so as not to offend anyone.

Did someone call your returns inferior? For the record it is quite possible to have what are thought to be good returns and still be underperforming whatever index applies. It is also possible to be underperforming on a risk adjusted basis. There is no way to know whether either applies to you without analysing your accounts. That said, that you are happy with your returns speaks volumes for your success as an investor. In the end, that's what it's all about!

You are right I'm not a CFP. And, my clients can give you three hundred million reasons why that doesn't matter!!!

Let's keep it friendly.
 
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Native Floridian

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To be clear, I'm not throwing stones with this post - just want to show that contrary to what all the Vanguard advertising says, you can make money in "load" mutual funds if you know what you are doing. Or, if you hire someone who knows what they are doing.( i use the term load because it's what most here recognise)

Looking at Morningstar the biggest position in my own 401k is a mid cap blend fund. ( sorry can't give the name) It does carry more market risk than does the fund discussed here. In fact in 2008 it was down more than twice what Wellington was down. It's what we call a high beta fund. (that's a technical term, write it down!) That said, inspite of having a front end sales charge of a whopping 5.75% and an expense ratio that would give Jack Bogle a heart attack ( even with his new transplanted heart ) 10k invested in 2003 was worth $38,586 at the end of 2012. ( my investment isn't 10k) Just imagine what it would be worth without the sales charge! Truth is, doesn't matter you can't get it without the sales charge. Of course with the benefit of DCA pumping dough into the fund every month even when it was down in 08 into 09, I've done even better than that.

Full disclosure - my 401k is balanced out with some less aggressive funds. The biggest allocation on the conservative side has a ten year performance of 9.13% net of fees. That's slightly better than VWELX at 8.92%

The point - before you drink the Kool-Aid that only one way is the best way realize there are many ways to achieve investment success.
 
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Produce Guy

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what do you think about Nano tech. stocks?
 

Peyton Manning

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Seems I'm in waay over my old head. Would you say generally, that a particular funds performance over 5 years is related directly to it's risk? That a fund paying 8% is riskier than one paying 3% over the same time?
Also, I think the market fell what in 06?, that a fund that has had positive numbers over ten years is safe?
 
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0121stockpicker

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Native Floridian said:
SVP/FA at a major, 30 years exp, just over 300 mil AUM.

Truthfully, i'm a dinosaur. I'm old school. Between my production and totally clean U4, 29 years, 11 months and 22 days without a complaint, my bosses have to put up with me. Not that they mind. I run my business my way.

I'm not a CFP. I'm not a CFP because at the time of my major business building the CFP was what I call a match book cover designation. Remember when technical schools use to advertise on match Book Covers? Anyway, of course the CFP has come a long way since. But, back in the day, if you could fog a mirror and count to ten you got your CFP. OK, maybe not that easy, but certainly not very hard. Some of the guys i know who have the designation are not the sharpest tools.

Today the CFP holds value. if i wasn't already built I'd probably get one. But as it is why? I compete against CFPs every day. I win more than i lose. It's me selling from the heart while they sell from the chart. For me it's fun because while they get all wrapped up talking Wall Street to show how smart they are I sit down and talk mainstreet making a personal connection with the prospect. It's a people business. It's worked for me.

Obviously i can't give advice here on a personal level. So, I'll limit my comments to direction, general investment concepts, and do my best not to nit pick the well intentioned advice given here.

Sure but your a lot more qualified on personal finance than I am.
 
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0121stockpicker

0121stockpicker

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Produce Guy said:
what do you think about Nano tech. stocks?

Early stage of development so you have to be very very careful. Be prepared to lose everything. Have any particular companies in mind?
 
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0121stockpicker

0121stockpicker

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lastleg said:
native, OK friendly. I do not like being talked down to I suppose.

Guys I think you are both right. I think some people enjoy finance and have the time to craft a really good financial plan.

I also believe that many definitely can benefit from hiring someone to active manage their funds. And people deserve to be paid for that expertise.
 

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